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Global demand for gold reached new heights in the second quarter of 2008, rising 9% year-on-year to $21.2 billion according to figures from the World Gold Council. Investment demand also surged strongly, reaching $3.5 billion over the same period, 29% higher than in the equivalent period in 2007, with particularly strong demand from the US, China, Egypt and Vietnam. The gold price has retreated from its high of the summer but remains popular with investors seeking diversification.
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As negative news continues to unfold, it would be easy for investors to recoil from the equity markets. Now could be the time to do precisely the opposite, however, with sentiment at a record low, the oil price in decline and decisive moves taking place in the financial and housing sectors.
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A rich supply of natural resources has given African equity markets some protection in an environment of rising oil prices and credit market turmoil. If anything, the onset of the credit crisis last summer helped to accelerate the investor shift towards emerging and frontier markets, a shift that had been underway for some years.
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Guy de Blonay, manager of the New Star Global Financials Fund, comments on the weakness and volatility affecting stockmarkets over the summer months and explains why the fund will maintain a cautious but opportunistic approach.
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Only a year ago, there appeared to be attractive investment opportunities in a myriad of sectors and locations. Global economic growth was strong, interest rates were low, debt was readily available and the equity market bull run was in its fourth year. Since the credit crisis began last summer, however, the landscape has dramatically shifted and deteriorating economic conditions have sapped investors' risk appetites.
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Conditions have remained challenging across financial markets in recent months as three key factors – the credit crisis, rising energy prices and growing inflationary fears – have led to deterioration in the global economic environment.
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Since the restructuring of its portfolio at the beginning of the year the New Star European Growth Fund, lead by Richard Pease, outperformed both its benchmark and sector over the five months to 30 May 2008*. The fund, which is AAA rated by Standard & Poor's† returned 3.1% in the month to end May versus 1.5% from the FTSE Europe ex UK Total Return Index*. In this market update, Richard details the opportunities he sees in stocks with earning streams less reliant on global economic conditions.
*Source: Lipper, mid-mid, net income reinvested to 30.05.08. For performance purposes, the New Star European Growth Fund is measured against the FTSE Europe ex UK Total Return Index and is in the IMA Europe excluding the UK sector.
†Rating at end May 2008.
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The past year has been challenging for European value investors. While the New Star European Value Fund has not been immune from this volatility, it returned 1.82%* over the six months to 31 May 2008 versus a fall of 0.06% in the IMA Europe excluding UK sector index, placing it 22nd out of a total of 108 funds.
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New Star is launching the New Star Indian Equity Fund to provide investors with access to the compelling investment potential of one of the world's largest and fastest growing economies.
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When securities markets are weak and volatile and when febrile investor sentiment holds sway, investment based on rational analysis of longer-term trends can yield profitable opportunities. More than two centuries ago, Benjamin Franklin said "time is money". His wisdom remains relevant in the fixed income markets today since bond investing involves lending money to a borrower in exchange for a regular coupon over time and the promise of capital repayment at some predetermined date.
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It is difficult to be bullish on the US financial sector these days. The sector hit another low this month and nothing that the authorities do or say seems to be making any difference. Despite this, buying high quality financial franchises such as Merrill Lynch will almost certainly prove to be a sound long-term investment.
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The UK commercial property market had a particularly testing 2007, with sharp falls in capital values. While falls in the values of other asset classes such as equities or bonds are common, the fact that prior to 2007 UK commercial property had delivered positive returns every year since 1993 highlights the significance of last year’s poor returns. Although 2008 has started on a more encouraging note, as managers of the New Star UK Property Unit Trust we believe an update on what has happened and what may happen from here may be helpful to existing and potential investors.
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After years in the wilderness, technology is being welcomed back into the investment fold. The sector has struggled with its image since the technology bubble burst in 2000 but, with factors stacking up in its favour, investors are beginning to rekindle their interest.
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